Wellcome Trust signals long-term commitment
after Co-op deal
THE Wellcome Trust has signalled its intention to continue investing in British
agriculture following its record £249 million purchase of The Co-operative Group’s
The world’s second biggest charitable foundation secured the future of The Co-
op’s Farmcare business with the biggest agri-investment deal in the UK to date
and one of the largest global deals of its kind.
Farmcare’s 15 farms, covering 15,997 hectares (39,533 acres), mainly of arable
land across the country, were put up for sale earlier this year in response to the
group’s wider financial turmoil.
The package also includes three pack houses, more than 100 residential
properties and 27 commercial properties.
All existing Farmcare management and employees will transfer with immediate
effect and the management structure will remain intact with Wellcome Trust
representatives joining the board.
The trust, which fought off competition from major investors at home and abroad,
has pledged to invest in the business and maintain services such as Farmcare’s
educational Farm to Fork programme.
Managing director of investments Peter Pereira Gray made it clear the trust,
which spends more than £700m a year on driving improvements in human and
animal health, was in it for the long-run and was interested in more than the
asset value of the farmland and properties.
“We think it is a great business,” he told Farmers Guardian. “It is profitable, it has
scale and it plays to a number of our interests in terms of the increasing
population and food production.
“This is very much being looked at as a long-term business. We bought it as a
“We think there is the potential to further invest in this business, given the well-
publicised constraints the original parent company had. There are real
opportunities to pick this business up and move it forward.”
Mr Pereira Gray cited potential opportunities in developing rural property,
renewable energy and tourism beyond the core food production business.
He hinted, once the trust had come to terms with its new acquisition, it could be
open to further investment in the sector.
“If something came onto the market we felt was the right thing at the right time,
Wellcome has the financial capacity to increase its exposure to this sector.
Equally, we want to digest this particular business now but I would have thought
we are more interested in grrowing it from here than in shrinking it,” he said.
Farmcare chief executive Richard Quinn described the deal as ‘tremendous’ news
for the company and its staff and ends the uncertainty about its future.
“This is a good business which is already profitable but we know we can do more
with it,” he said.
The deal has been widely welcomed within the farming industry, partly for the
continuity it brings to the Farmcare business.
At a time when industry confidence is being hit with low prices across most
sectors, it is also being seen as a vote of confidence in the long-term potential of
the UK farming sector.
NFU president Meurig Raymond welcomed the trust’s long-term commitment.
“They must have confidence in the industry to invest that much into the largest
farming business in the UK.”
Analysis – why the deal worked
THE Wellcome Trust might not have paid the best price for the Co-op’s farms – but
it has given the troubled group and its Farmcare business the continuity and
potential for growth both strongly desired.
It was always going to be a complicated sale. It was forced, not by anything to do
with the health of the Farmcare business, but the dire financial straits the Co-op
group found itself in at the start of the year, largely due to the mismanagement of
its banking arm.
Because of the unique structure of the Farmcare business, which also supplied the
Co-op’s retail stores, the group was determined to sell it as a single entity, rather
There was plenty of interest from major investors and landowners at home and
abroad. Some, such as inventor James Dyson, would only have been interested in
taking on parts of the business.
The longer term intentions of the others were unclear.
The Wellcome Trust had the funds but also a track record in ‘managing a
sustainable investment portfolio’ for the long-run and ‘values are closely aligned
to those of The Co-operative’, said Richard Pennycook, the Co-op’s interim group
The trust, which is underpinned by a £16.5 billion endowment and spends more
than £700 million a year on driving improvements in human and animal health,
already owns property valued at £1.8bn, including farms in Cambridgeshire,
Hertfordshire and Cheshire.
Pledging continuity and investment, it clearly sees the purchase as more than a
property asset to accumulate wealth.
The business is important too – the farms will be required to return an
appropriate investment return over time, said Wellcome managing director of
investments Peter Pereira Gray, who will chair Farmcare’s board.
With staff and management moving over en bloc, the farms will also continue to
supply the Co-op’s stores.
The land was sold at an average of about £15,600/hectare (£6,300/acre),
including the pack houses and property, compared with average equipped
farmland prices of £27,170/ha (£11,000/acre) during the second quarter of this
Asked if he felt the Trust got a good deal, Mr Pereira Gray said: “We were
prepared to pay that price. But as I look at the quality of the business and the fact
that it was sold as whole, I think a fair price has been paid and received in the
A sign of growing investor confidence in farmland
Land agents Bidwells, which advised the Trust on the purchase, said the deal
underpinned the recent trend from investors, across the world, to acquire
The latest Bidwells Agri-Investment Index (BAII) confirm that UK agricultural
property continues to out-perform all other mainstream investment asset classes.
Rural assets let to tenants under a range of tenancy agreements delivered total
returns of 18.5% in 2013 according to BAII, matching the ‘exceptional’ return
recorded in the stock market.
Rural returns also ‘significantly out-paced’ commercial and residential property.
Bidwells Ian Monks said increasingly investors were looking to take a strategic,
long term view.
“The Agricultural Industry must go forward with adequate funding but this scale
of investment is generally unachievable in a single deal,” he said.
“Whilst there are generally more large scale deals in parts of the world like
Australia, the Wellcome Trust’s acquisition of this farming business which covers
15,997 hectares (39,533 acres) is both rare and a sign of investor confidence.”
“The Co-operative Group’s farm business (Farmcare Trading Ltd) was an ideal fit
for The Wellcome Trust.
“They are investors with a long-term time horizon and one that recognises the
importance of responsible stewardship to generate returns over such a timescale.”